The EEOC recently released a sample notice, along with a series of questions and answers, to assist employers that offer wellness programs in satisfying the notice requirement set forth in the final regulations regarding the compliance of employer-sponsored wellness programs with the Americans with Disabilities Act (“ADA”). Use of the sample notice is not mandatory, but employers that offer a wellness program are required to provide a notice to employees which informs them, in an understandable manner, of (i) the information that will be collected by the employer in connection with the wellness program, (ii) how such information will be used, (iii) who will receive it, and (iv) how it will be kept confidential. The effective date for compliance with the new ADA notice requirements is the first day of the plan year beginning on or after January 1, 2017. The sample notice is available here. The questions and answers are… Continue Reading
Proposed Regulations Issued Addressing Expatriate Coverage, Excepted Benefits, and Essential Health Benefits
On June 10, 2016, the IRS, DOL, and HHS released proposed regulations clarifying when expatriate health coverage qualifies for exceptions under the Affordable Care Act (the “ACA”), when certain coverage will qualify as excepted benefits under the ACA, and how self-insured and large group insured plans should define essential health benefits. Expatriate Coverage In general, an expatriate health plan will be exempt from the ACA’s plan design requirements; the PCORI, Transitional Reinsurance, and Health Insurer fees; and will qualify as minimum essential coverage for covered individuals subject to U.S. tax law if the following are true: At least 95% of the primary enrollees are expatriates (disregarding non-U.S. citizens residing in their home country); The insurance carrier or plan administrator in conjunction with a third party administrator meets certain business criteria; The plan covers inpatient, outpatient, physician, and emergency services; The plan is reasonably believed to meet the ACA’s minimum value… Continue Reading
Over the past several months, high profile class action lawsuits have been filed against plan sponsors and fiduciaries of very large 401(k) plans alleging breaches of fiduciary duty related to excessive plan administrative fees and underperforming investment options. A new class action lawsuit filed in the U.S. District Court of Minnesota raises concerns that plan sponsors and fiduciaries of relatively small 401(k) plans may also become targets of such suits. Similar to the class actions filed against fiduciaries of large 401(k) plans, plaintiffs in the case of Severson v. LaMettry’s Collision, Inc. allege their employer, its president, and its CFO breached their fiduciary duties by causing the employer’s 401(k) plan to pay excessive administrative fees, selecting imprudent classes of investments, and selecting investment options that were unnecessarily expensive. Unlike the other class actions, the LaMettry 401(k) plan is relatively small, having just over 100 participants and approximately $9.2 million in… Continue Reading
In the case of Connecticut General Life Insurance Company v. Humble Surgical Hospital, LLC, Cigna, as third-party administrator for various group health plans subject to ERISA (the “Plans”), sued Humble Surgical Hospital (“Humble”), an out-of-network provider, to recover overpayments Cigna had allegedly paid to Humble as a result of Humble’s “fraudulent billing practices,” such as waiving patients’ financial responsibility under the terms of the Plans. Prior to bringing its suit, Cigna had begun processing claims submitted by Humble outside of its standard claims processing model, based on Cigna’s determination that such claims were fraudulent. This resulted in Cigna paying significantly less on Humble’s claims than it would have paid if Cigna’s standard out-of-network repricing methodology had been utilized. Consequently, Humble countersued Cigna under ERISA, based on its status as an assignee of the Plans participants’ claims, seeking payment for underpaid claims as well as monetary penalties under ERISA for Cigna’s… Continue Reading
The IRS recently released a memorandum from the Office of Chief Counsel of the IRS, which states that cash rewards provided under an employer-sponsored wellness program may not be excluded from an employee’s gross income under Sections 105 or 106 of the Internal Revenue Code of 1986, as amended (the “Code”), even if the program generally qualifies as an accident or health plan under Code Section 106. The fair market value of any non-cash wellness program rewards that cannot be excluded from income as either (i) medical care under Code Section 213(d) or (ii) de minimis fringe benefits under Code Section 132(e) (e.g., gym memberships) must also be included in income. Finally, reimbursements to employees of any portion of wellness program premiums paid through salary reduction under a Code Section 125 cafeteria plan must also be included in gross income. The memorandum is available here.
The European Parliament and the Council of the European Union have approved the General Data Protection Regulation (“GDPR”) (Regulation 2016/679), which will replace the Data Protection Directive (Directive 95/46/EC) effective May 28, 2018. GDPR affects companies that use or process personal data in the European Union (“EU”), as well as companies residing outside of the EU that process data of EU citizens or residents (which may include U.S. citizens) pursuant to the offering of goods and services to such individuals or the monitoring of their behavior. GDPR could affect U.S. plan administrators of pension, welfare, equity, and other deferred compensation programs if offering such benefits is deemed to be in connection with the offering of services and participants include EU citizens or residents. Non-EU companies subject to the new regulation must appoint a representative in the EU to respond to EU regulator inquiries and, presumably, to receive penalty assessments for… Continue Reading
In most financing transactions, particularly project finance transactions, lenders seek to obtain security over all of a borrower’s assets. One crucial asset that sometimes does not get sufficient attention is insurance proceeds. Lenders are accustomed to ensuring access to the borrower’s insurance coverage through “additional insured” or “loss payee” provisions. In theory, if there is an “occurrence” or event resulting in physical loss or damage to the borrower’s property or even ensuing business interruption losses, the lender, as “additional insured” or “loss payee,” is independently entitled to recover the value of the damaged property or lost profits directly from the insurer as a party to the applicable policy—even if the insured is in bankruptcy. In practice, this strategy usually works well. After all, the overriding legal rule dictates that policies and their proceeds are only the property of the bankruptcy estate if the borrower is the beneficiary of such proceeds… Continue Reading
Several Federal Agencies Issue Revised Proposed Rule Prohibiting Incentive Compensation for Excessive Risk Taking by Covered Financial Institutions
Several federal agencies, including the SEC, issued a joint revised proposed rule to implement Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Proposed Rule”), which prohibits incentive-based compensation that encourages inappropriate risks by certain financial institutions. The Proposed Rule divides covered institutions into three tiers based on their average total consolidated assets. Although many aspects of the Proposed Rule are similar to the rule proposed in 2011, there are a few key differences. These differences include a new definition of incentive-based compensation that would not be considered to appropriately balance risk and rewards, a new recordkeeping requirement regarding the structure of incentive-based compensation, new requirements for deferral of incentive-based compensation, downward adjustments and clawbacks, and requirements for the structure of the institution’s compensation committee. The Proposed Rule is available here.
The Payment Card Industry Security Standards Council recently released revised data security standards for payment cards, which include debit cards issued by vendors in conjunction with flexible spending accounts, health reimbursement arrangements, and health savings accounts. These revised standards update the Payment Card Industry Data Security Standard (“PCI DSS”) to version 3.2 and contain a variety of enhancements to protect against security threats, including revised system penetration testing requirements, enhanced policies and procedures for detecting failures, and stricter authentication protocols. The PCI DSS responsibilities fall on the card issuers, vendor service providers, merchants, etc., not on an employer which merely sponsors or facilitates a spending account benefit that utilizes debit cards. PCI DSS version 3.2 will be viewed as a “best practice” until January 31, 2018. Beginning February 1, 2018, version 3.2’s standards become mandatory for the industry. Employers sponsoring or facilitating spending account benefits utilizing debit cards should update… Continue Reading
On May 16, 2016, the EEOC issued two sets of final regulations regarding the compliance of employer-sponsored wellness programs with the Americans with Disabilities Act (the “ADA”) and the Genetic Information Nondiscrimination Act of 2008 (“GINA”). The final regulations were generally consistent with the ADA and GINA wellness program proposed rules issued by the EEOC during 2015, which set forth limits on the inducements employers may offer to employees for participation in wellness programs that solicit health information from participants. Consistent with the proposed regulations, the final regulations also include confidentiality and notice requirements for wellness programs subject to the ADA and GINA. The effective date for compliance with the wellness program inducement limits and new ADA notice requirements is the first day of the plan year beginning on or after January 1, 2017. The final regulations under the ADA are available here. The final regulations under GINA are available here.